STATE OF MI CIDGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF V.IASHTE '- -1

HSBC BANK USA, National Association, as Trustee"

Plaintiff/appellee,

vs

MA,.l{Y F. YOUNG,

Defendant!appellant,

and

MR. OCCUPANT and MRS. OCCUPANT,

Defendants.

Circuit Court Case No. 11-693 AVHOD. Melinda Morris

District Court Case No. 10-3034 L1Hon. Julie Creal

TROTT & TROTT, P.c.By: Parisa Ghazaeri (p6.8009)Attorneys for plaintiff/appellee31440 Northwestern Hwy, Suite 200Farmington Hills, Ml 48334(248) 341-4943

LEGAL SERVlCES OF SOUTHCENTRAL WCHIGAN

By: Letitia A. Lee ' (P58548)Attorneys for defendant/appellant420 North Fourth AvenueAnn Arbor, Ml 48104-1104(734) 665-6181

ORDE DENYING PL AlNTIFF-APPELL-"JE 'SMOTION FOR RECONSIDER.\TION

At a session of the Court held in theWashtenaw County Courthouse in

the City of Ann Arbor onUCfieAL/? )2012

PRESENT: HONORAJ3LE MELlNDA MOR.mS1 Circuit Judge

Plaintiff/appellee HSBC Bank USA (H SBC) filed this action for possession of

defendant/appellant Mary Young' S home after a mortgage foreclosure by advertisement. The

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district court granted HSBC's motion for summary disposition and defendant sought leave to

appeal, which this Court granted. The Court ruled from the bench after hearing oral argument,

reversing the trial court's order granting summary disposition for plaintiff and remanding fOT

further proceedings. Plaintiff filed a motion for reconsideration. For the reasons stated below,

plaintiff's motion for reconsideration is denied.

I. BACKGROUND

Young refinanced her home with Wells Fargo Home Mortgage on April 22, 2004 , with

an adjustable interest rate that ranged from 9.25% to 10.875%. Young defaulted and received

notices ofdefault from Wells Fargo in Feb. , Apr . and Aug. of2008 .

On October 8, 2008, Wens Fargo purported to assign the mortgage to HSBC as Trustee

for Wells Fargo Home Equity Trust 2004-2. The Trust is governed by a Pooling and Servicing

Agreement (PSA). The PSA requires that all mortgages and notes be transferred into the Trust

by Sept. 29,2004. It also requires that mortgages transferred into the Trust not be in default.

Young's loan was pooled with many others for servicing in a process described in Bank

ofNY v Raftogianis, 418 NJ Super 323 , 333; 13 A3d 435 (2010): lenders sell , to a pool or trust,

substantial numbers of loans they have issued. Interests in the pool or trust: are sold to investors ,

who share in the funds received as the loans are repaid. Servicing entities are retained to

administer the underlying loans.

Most of these trusts are governed by pooling and servicing agreements. The relevant

portions of the PSA for the trust for which HSBC is the trustee providethat, for a mortgage loan

to be transferred into the Trust,

o the depositor must deliver both (l) the endorsed mortgage note 8i1 6 (2) a recordedassignment of the mortgage (or blank assignment in recordable form),

o the note and assignment must be delivered on or before the closing date,9/29/2004, and

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o there is no default existing under the mortgage/note and no foreclosure actioncurrently threatened,

The Depositor is defined to be Wells Fargo Asset Securities Corporation, the Custodian is Wells

Fargo Bank N.A. and the Trustee }'S HSBC.

The PSA is governed by New York law.

In January 2009, Wells Fargo and Young entered into a Loan Modification Agreement.

The agreement was on Wells Fargo letterhead and signed by an officer of Wells Fargo, which

was described as the lender. Young was unable to keep up with payments under the modified

loan.

HSBC commenced foreclosure by advertisement on March 11, 2010, and bought the

house at the sheriffs sale. Six months later, on Nov. 8,2010, HSBC filed a complaint for

possession in the district court.

Young served discovery requests on plaintiff, asking, among other things, to view the

original promissory note. Plaintiff produced a copy - not the original- on February 14, 2011.

The note was payable to Wells Fargo as lender and had no endorsements or allonges.

About a month later, plaintiff produced another copy of the note , this one with a stamped

and typed 'endorsement to HSBC as Trustee, with no date indicating when the endorsement

occurred.

When HSBC filed a motion for entry of judgment of possession, Judge Easthope found it

was essentially a motion for summary disposition and ordered that it be rc-noticed The COurt

also indicated it would allow Young to depose the signer of original note, another, more legible

copy ofwhich was produced at the hearing.

Defendant then filed a motion to depose Mills. She argued that the authenticity of the

purported note was in doubt, given the various versions of the note and the late production of an

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endorsed copy. Judge Goodridge admitted she had not read the pleadings and denied

defendant 's motion. She directed that information be obtained from plaintiff via interrogatories,

and if documentation on the endorser was not provided, authenticity would be an issue for trial.

The signer was Joan Mills, a vice president of Wells Fargo. In response to defendant's

interrogatories, Ms . Mills described only the general process by which notes are endorsed.

When asked when the endorsement was added to Young's note, she responded only "when the

loan was subsequently sold to HSBC. . ." She also indicated that the note has remained in WeUs

Fargo's possession since its execution in 2004.

Defendant attempted to file a motion to compel discovery and for leave to conduct further

discovery, but on June 9, 2011, the court refused to allow the motion and granted summary

disposition for plaintiff, finding that there was no evidence and none likely to be produced that

HSBC did not own the note , and that no potential factual development would alter the rights of

the mortgage and note bolder.

II. STANDARD OF REVIEW

A motion for summary disposition is reviewed de novo. Beach v Twp ofLima, 489 Mich

99, 105-06 (2011). The evidence is viewed in the light most favorable to the nonrnovant. In re

Smith Trust, 480 Mich 19, 23-24 (2008).

MeR 2.119(F), made applicable in appeals to the circuit court by MeR 7.110, governs

motions for reconsideration and provides:

Generally, and without restricting the discretion of the court, a motion for rehearing orreconsideration which merely presents the same issues ruled on by the court, eitherexpressly or by reasonable implication, will not be granted. The moving party mustdemonstrate a palpable error by which the court and the parties have been misled andshow that a different disposition of the motion must resul t from correction of the error.

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The language of the rule is not a restriction or limitation on a court's ability [0 reconsider a

previous opinion, Fets Engineering Co v Ecco Systems, Inc, 188 Mich App 362; 471 NW2d 85

(1991), vacated on other grounds, 439 Mich 977; 483 NW2d 619 (1992), and a court has the

discretion to correct any of its decisions that contain a serious error, to preserve judicial economy

and to minimize costs to the parties, Prentis Family Foundation v Barbara Ann Karmanos Ctr

Inst, 2661Viich App 39, 52; 698 NV12d 900 (2005); Smith v Sinai Hosp ofDetroit, 152 Mich App

716 , 723; 394 NW2d 82 (1986). The "palpable error" language oftbe MeR 2.1l9(F) denotes a

general rule but is not mandatory; circuit courts are not required to find palpable error to grant a

motion for reconsideration. People v Walters, 266 Mich App 341,350-51; 700 NW2d 4241

(2005).

A party's failure to present evidence, au argument or to cite available legal authority to

support its position on the motion of which reconsideration is sought, however, does not create

or constitute palpable error by which the court and the parties bave been misled. A court has the

discretion to deny reconsideration wben such an omission is the basis for the motion. See Woods

v SLB Property Management LLC, 277 Mich App 622,629-630; 750 NW2d 228

(2008),Churchman v Rickerson, 240 Mich App 223,233; 611 NW2d 333 (2000), American

Transmission, Inc v Channel 7 ofDetroit, 239 Mich App 695, 709-710; 609 NW2d 607 (2000),

Gjokaj v Scott, unpublished opinion per curiam of the Court of Appeals, decided 7/19/2007

(Docket No. 270270); 2007 V!L 2067593 (Mich App 2007), Plait 1) Hartfield Enterprises, Inc,

unpublished opinion per curiam of the Court of Appeals, decided 3/23/2006 (Docket No.

265319); 2006 WL 740077 (Micb App 2006), Hernandez v Taylor Commons Ltd Partnership ,

unpublished opinion per curiam of the Court of Appeals, decided 6/29/2004 (Docket No.

247576); 2004 WL 1459527 (Mich App 2004), and Brantman v Brantman, unpublished opinion

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per curiam of the Court of Appeals, decided 512212003 (Docket No. 243800); 2003 \VL

21205979 (2003).

III. DISCUSSION

In its motion for reconsideration, plaintiff-appellee first argues that the Court committed

palpable error in adopting .an argument rejected by the-Michigan Supreme Court in Residential

Funding Co, LIC v Saurman, 490 Mich 909; 805 NW2d 183 (20 11), and the Sixth Circuit in

Livonia Prop Hldgs, LIC v 12840-12976 Farmington Rd Holdings, LLC, 717 F Supp 2d 724,

735 (ED Mieh 2010), aff'd , 399 Fed Appx 97 (CA 6,2010), and expanding the scope ofMCL

600.3204(1)(d).

Plaintiff-appellee is .incorrect. In Saurman, the Michigan Supreme Court held that the

Mortgage Electronic Registration System, which was the mortgagee but not the holder of the

note and not the owner of note, nonetheless was an owner of an interest in the indebtedness and

had standing to foreclose by advertisement. The issue presented to this Court was completely

different Irom that addressed in Saurman. Here, defendant argued that HSBC lacked standing,

not because it was a mortgagee without a note or interest in the indebtedness, but because neither

the mortgage nor the note bad been validly and effectively transferred to HSBC. The mortgagor

here claimed that the purported assignment to HSBC was void because it did not comply with the

terms of the Pooling and Servicing Agreement that governed the Trust; and that since HSBC

owned neither the mortgage lien nor the note, it did not have any interest in the indebtedness and

the statute did not authorize it to foreclose on defendant 's property. Even under Saurman : an

entity musthave an ownership interest in at least one - the mortgage or- the indebtedness - toforeclose by advertisement. If defendant/appellant is correct that failure to comply with the PSA

voids the transfers to the Trust, then HSBC would not have such an interest.

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Second, HSBC argues that the Court committed palpable error in allowing defendant-

appellant to challenge the assignment of her mortgage and note because a non-party lacks

standing to challenge an assignment of a mortgage or note. HSBC relies on Rogan v Bank One,

457 F3d 561,566-67 (CA 6,2006), and Livonia Property Hldgs, LIC v 12840-12976

Farmington Rd mdgs, uc, 717 F Supp 2d 724 , 746 (ED Mich 2010).

It is true that the general rule is that only parties to and third party beneficiaries of an

assignment may challenge its validity, but Michigan recognizes an exception to the general rule.

As the court states in Livonia Property Hldgs, supra at 102,

An obligor "may assert as a defense any matter which renders the assignment absolutelyinvalid or ineffective, or void. " 6A CJS Assignments 132 (2010). These defensesinclude nonassignability of the instrument, assignee IS lack oftitle , and a prior revocationof the assignment, none of which are available In the current matter. Jd. Obligors havestanding to raise these claims because they cannot otherwise protect themselves fromhaving to pay the same debt twice. Id. In this case, Livonia is not at risk of paying thedebt twice, because Farmington has established that it holds the original note.Farmington has produced ample documentation that it was in possession of the note andhad been assigned all rights therein prior to the initiation of foreclosure proceedings. Thedistrict court reviewed the copies in exhibits and the originals produced by Farmingtonand was satisfied thai they were authentic . 'Without a genuine claim that Farmington isnot the rightful owner of the loan and that Livonia might therefore be subject to doubleliability on its debt , Livonia cannot credibly claim to have standing to challenge the FirstAssignment.

Thus, HSBC is incorrect that Michigan authority does Dot permit a mortgagor to challenge the .-

validity of an assignment. HSBC has provided no Michigan authority on the question whether

the defect in its title that defendant alleges renders the assignment completely void or merely

voidable, or whether such a difference is material, and no argument that another state 's law

controls in the present case.

HSBC argues, third, that the Court committed palpable error by allowing defendant-

appellant to invoke the Pooling and Servicing Agreement as a basis for finding the foreclosure

ineffective, because defendant-appellant, who was not a party to the agreement, has no standing

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to enforce it. This issue has not been decided by the Michigan Court of Appeals or Supreme

Court, and there is conflicting authority in other jurisdictions. Admittedly, the vast majority of

the courts deciding the issue have held that mortgagors have no standing to challenge an

assignment far failure of the parties to the assignment to comply with the PSA. See, e.g.,

Gumapac v Deutsche Bank Nat 'I Trust Co, unpublished opinion of the US Dist Ct CD Cal,

issued 7/30/2012 (Docket No . . 2:11-cv-l 0767-0DW [CWx]) (listing decisions). ' Most of

\Gumapac at "'4:

However, Courts have resoundingly rejected mortgagor claims predicated on contentions that a party to thesecuritization process failed to adhere to the PSA, reasoning that the mortgagor is not a party to the PSAand thus lacks standing to assert such claims. Rodenhurst v Bank ofAmerica, 773 F Supp 2d 886, 899(DRaw 20 11) ("The overwhelming authority does not support a [claim] based on improper securitization");Cooper v Bank o/NY Mellon, No 11-00241 LEKRLP, 201 1 WL 3705058, at *17 eDt-law Aug 23 ,2011 )

(dismissing breach of contract claim brought by delinquent mortgagors for breach or the PSA becausemortgagors were not third-party beneficiaries ofPSA and thus lacked standin g to enforce its terms); Abubov Bank ofNY Mellon, No ll-D0312 JMS-BMK, 2011 WL 6011787, at ~ 8 (DRaw Nov 30, 20(1) (notingthat a third party lacks standing to raise a violation of a PSA); see also Bascos v Fed Horne Loan MortgCorp, No CV 11-396S0-JFW (JCx), 2011 WL 3157063, at *6 (CD Cal July 22,2011) ("Plaintiff has nostanding to challenge the validity of the securitization of the Joan as he is n01 an investor of the loan trust");Greene v Home Loan Servs, Inc, 2010 Wl, 3749243 , *4 (D Minn Sept 21,2010) ("Plainti ffs are not a partyto the [ PSA] and therefore have no standing to challenge anypurported breach of tae rights and obligationsof that agr eement.") ; In re Correia, 452 BR 319 , 324 (BM Js'l Cit 20 11) (rejecting argument by debtorsthat mortgage assignment was invalid based on noncompliance with the PSA, as debtors were neitherpart ies, nor third party beneficiaries, oftbe PSA ).

For a thoughtful discussion of the issue, see Butler v Deutsche Bank Trust Co Americas, _ F Supp 2d ----J_;20 12 WL 3518560, ~6-7 (D Mass 2012):

Courts in this district are in agreement that a mortgagor lacks standing to challenge the assignmentof his mortgage directly if he is neither a party to nor a third-party beneficiary of the assignment contract . ...

However, "the question of whether [a mortgagor bas] standing to challenge [an] assignment isdifferent from the question of whether [be has] standing to challenge the foreclosure on the basis taa. ltileforeclosing entity) did Dot properly hold the mortgage at the time of the foreclosure." . . . A number ofdecisions have held that mortgagors have standing to challenge a foreclosure sale as void due to anallegedly invalid assignment. .. .

*Mortgagors challenging foreclosure sales that are void due to invalid assignments have standing to

do so because they have demonstrated "a concrete and particularized injury in fact, a causal connection thatpermi ts tracing the claimed injury to the defendant's actions, and a likelihood that prevailing in the actionwill afford some redress for the injury. " ...

"' *J do not, however, hold that a mortgagor has standing to challenge a foreclsoure on the bas is ofjust any porenrially invalidating deficiency in an assignment Massachusetts case law distinguishes

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those courts, however, have reached that conclusion through application of the general rule that a

nonparty to an assignment has no standing to challenge its validity. As discussed above, that is

not the rule in Michigan.

For the reasons stated above, plaintiff-appellee's motion for reconsideration is denied.

~J~M~. Melme-Mom sCircuit Court Judge

PROOF OF SERV:-;::R

1certify that I mailed a copy of the above Order upon all attorneys of r)10rd or p~~y'Blacing said copyin the first class mail with postage prepaid from Ann Arbor, Michigan on this!!L day of (J/{;-'tOMv ,2012. .

IJ{-(6Betty-Jo Sp(i rs-BeedingJudicial Coordinator

between void and voidable assignments... If an assignment is voidable, but has not been avoided, then theassignee has legal title to convey to the purchaser at a foreclsoure sale. If an assignrncnr is void, then theassignee was assigned nothing and has nothing to convey to the purchaser at the foreclosure sale. Where a"grantor has nothing to convey .. . [tjhe purported conveyance is a nullity, notwithdstanding the parties 'intent." ,_.

Here, however, Butler fails to allege facts or present legal argument sufficient to establish that theassignments to Deutsche Bank were void due to their failure to comply with the Poeling and ServicingAgreement....

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